Do I Need Life Insurance for My Family?

Life insurance is one of the core tenants of good financial planning. Investing and pensions are important because saving for the long term is a wise thing to do, but accidents and emergencies can happen at any time, to any one. Many people are not in the position to financially recover from a family tragedy, because the bills still need to be paid, and unless you have significant savings already, you may not have enough money to cover major expenses like a mortgage.

Ensuring your family’s security is more critical than ever. Life insurance serves as a steadfast shield against life’s uncertainties, providing the assurance that your family’s financial needs will be met in difficult times. This raises an important consideration: the necessity of life insurance for safeguarding your family’s future.

What Is Life Insurance?

At its core, life insurance is a contract with an insurance provider that, in exchange for premiums, promises to pay a designated beneficiary a sum of money upon the death of the insured person. It’s a fundamental component of family financial planning, designed to cover debts, ongoing living expenses, and future obligations like education costs.

Types of Life Assurance Available

The UK market offers various life assurance options, tailored to different needs and circumstances:

- Term Assurance: Provides coverage for a specified term, offering a safety net during your most financially vulnerable years. Term assurance is one of the simplest and cheapest forms of life insurance available in the UK, and is extremely popular compared to other forms of protection – but that doesn’t mean it is the only thing you will need.

- Whole Life Insurance: Unlike term assurance, it covers you for your entire life, accumulating a cash value that can be a resource in the future.

- Critical Illness Cover, Income Protection, and Private Medical Insurance are additional forms of protection, each addressing specific financial risks families may face.

Joint Life Insurance Or Two Separate Policies?

If you are married or in a relationship, and have a large shared liability, such as your mortgage, or if you have children, you might be wondering if one combined policy is better than two separate policies. That’s a good question.

A combined policy may be simpler in some cases, because it is only one contract to worry about and one payment to make. Two separate policies can have the benefit of flexibility. One policy could be cancelled if it is no longer needed. If insurance rates change it might be worth cancelling one policy and taking out a new one – but this could be tricky or impossible with a combined policy.

(Please note that we would never advise anyone to cancel a life insurance policy without a thorough review and recommendation.)

You also have the question about where the benefits are paid. With two separate policies, benefits can be paid to each other and trusts created to help the surviving family.

On the surface there is a lot more flexibility with two separate policies, but the real answer is that it depends on your personal circumstances. We can advise you on the right solution for your needs.

Life Insurance and Mortgages

For homeowners, life insurance is particularly crucial when taking out a mortgage. It ensures that your family can remain in their home, without the burden of mortgage repayments, in case of your premature death.

How Much Life Insurance Do I Need?

The right amount of life insurance is unique to each individual and depends on various factors such as existing debts, income levels, and future financial goals. A thorough assessment of your financial situation is necessary to determine the coverage that best suits your family’s needs.

Am I Paying Too Much For My Life Insurance?

Life insurance premiums vary based on age, health, lifestyle, and the amount of coverage you seek.

It’s very important that you don’t simply compare the cost of your own policy with someone else’s, as all these factors and more can make a difference to the final cost. You also need to consider the length of your policy, i.e. how many years the policy will last, and other details which may be buried in the contract, such as renewal options, or extra types of cover.

Can I Review My Life Insurance?

At the same time, you don’t want to pay more than you have to. If you want a review of your existing cover, one of our chartered financial advisers will be able to help. We will thoroughly review your existing cover and compare it to your liabilities (like your mortgage) to make sure it is enough. We will also make sure we include any employment benefits you might have. These can be surprisingly valuable, but of course they only last as long as you are employed.

When our review is complete we may recommend changes to your cover – or we may advise you not to do anything. As Independent Financial Advisers we will only tell you what we believe is the best course of action for you.

Life Insurance Is Fundamental To Good Financial Planning

The decision to take out life insurance is a significant one, reflecting a commitment to the well-being and financial security of your family. By understanding the different types of life assurance available, assessing your family’s needs, and considering the cost implications, you can make an informed choice about life insurance. Consulting with a chartered and independent financial planner can provide personalised advice tailored to your unique situation, ensuring that your family is protected, no matter what the future holds.

For detailed insights and personalised financial planning services, consider exploring BBi Financial Planning’s services for families, which emphasise tailored solutions for family protection and financial well-being.